Employment gains aren't attracting believers yet

Employment statistics and the jobless rate have improved over the past several months. These usually point to a rebounding economy, but there's still considerable doubt over just what these numbers really mean.

WASHINGTON — Employment statistics and the jobless rate have improved over the past several months. These usually point to a rebounding economy, but there's still considerable doubt over just what these numbers really mean.

On the face of it, most signs on the labor front are encouraging. The ADP National Employment Report — which gauges private-sector hiring — that was released Wednesday found that private-sector employment grew by 170,000 positions in January. The ADP report has been a generally accurate gauge of what follows in the Bureau of Labor Statistics' monthly jobs report, which is due Friday.

Similarly, the Labor Department reported Thursday that unemployment claims fell by 12,000 over the past week, to 367,000. The four-week average, which levels out volatility, fell to 375,750. That's the second-best showing since June 2008, and it's at a level consistent with a falling unemployment rate.

"I think it is very good news that we've seen the four-week average consistently getting down. They're still elevated from what a normal recovery period would be, but they are below the peaks of prior recessions," said Martin Regalia, the chief economist for the U.S. Chamber of Commerce. "The question is how long would that continue if growth slows to 2 percent, like many economists are forecasting for the first half of the year."

For now, the improving jobs numbers are combining with strong showings in data for manufacturing, retail sales and the steadily improving auto sector. But economists fear that Europe's deepening debt crisis, reductions in state and federal spending and a bitter U.S. presidential election may drag against growth later this year. So might rising oil prices, a growing worry as tensions worsen with Iran.

Then there's the workforce-exit problem. One reason the jobless rate stood at 8.5 percent in December is that the labor force is smaller now. The workforce participation rate was around 64 percent for most of last year, well below the 67 percent rate a decade earlier.

Millions of workers either have given up on looking for jobs or have exhausted their unemployment benefits and can't get back into the workforce. In either case, the workforce size isn't growing sharply as the economy improves.

"I do believe that it's artificially making the unemployment rate, as it is defined, look better," said Heidi Shierholz, a labor economist with the liberal Economic Policy Institute. She isn't betting on a jobs recovery anytime soon. "They're not coming back yet. Honestly, I don't expect them to come back until ... jobs prospects improve substantially."

Shierholz points to four available workers competing for every job opening and predicts a long, slow climb ahead.

"It's still an incredibly hostile environment for job seekers. It won't pull in workers from the sidelines. It will take sustained robust growth," she said.

Regalia concurred.

"The question is ... after a long period of time and duration of unemployment, what triggers the re-entry into the workforce?" he said. "That's what's very hard to guess at, because it isn't something we have a lot of data on. We haven't had these kinds of increases in duration of unemployment, we haven't had a recession that was this steep, lasted this long and had this long of a tail in terms of a recovery. So it's really a crapshoot."

While the sluggish U.S. recovery may be keeping workers from rejoining the labor force, the unemployment data does offer a snapshot of what's happening in regions of the country. A recent report by the Pew Charitable Trusts found that South Atlantic states and Pacific Coast states — mostly California — have the highest percentages of long-term jobless workers among their unemployed.

The study found that while the five Pacific states — California, Oregon, Washington, Alaska and Hawaii — had a combined unemployment rate of 10.3 percent in December, 34.2 percent of their unemployed workers had been jobless for a year or longer. It was even worse for the South Atlantic states, which had a combined jobless rate of 8.9 percent, but 37.6 percent of their unemployed workers hadn't worked in more than a year.

"What we found is that the number of long-term unemployed is historically high, levels not seen ... since the aftermath of World War II," said Ingrid Schroeder, the director of federal economic policy research for Pew.

Research by Pew also found that the so-called Great Recession saw a huge number of workers reporting permanent layoffs, peaking at 54 percent of all the unemployed in the final months of 2009. In past recessions, workers reporting temporary layoffs held a much larger share of the number of unemployed.